If a New Direct Loan Is Originated Before the End Of the Student Loan Payment Pause, Will Interest Also Be Suspended?

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This guidance is not award-year-specific and applies across award years.

This AskRegs Knowledgebase Q&A was updated on October 23, 2022 to reflect the Biden administration announcement, which further extends the COVID-19 federal student loan payment pause.

Under the U.S. Department of Education's (ED's) latest extension, "Payments will resume 60 days after the Department is permitted to implement the [Biden Student Loan Forgiveness] program or the litigation is resolved, which will give the Supreme Court an opportunity to resolve the case during its current Term,” ED’s notice reads. “If the program has not been implemented and the litigation has not been resolved by June 30, 2023 – payments will resume 60 days after that.”

Unfortunately, we don’t yet know if new loans will carry the interest suspension. We have asked ED but have not gotten a response. As soon as we have a definitive answer to this question, we will update this AskRegs Q&A and post it in our COVID-19 Web Center and in Today's News.

Remember: For borrowers who are receiving the interest suspension, the interest rate technically is not zero on these loans. Even if the loan servicer indicates a zero percent interest rate, the interest rate on the loans remains the interest rate assigned to the loan when it was originated. Accrual of interest is suspended from March 13, 2020 through the end of the payment pause on eligible federal student loans.

Update Notes:

AskRegs Q&As represent NASFAA's understanding of regulatory and compliance issues. They are FOR INTERNAL USE ONLY. While NASFAA believes AskRegs Q&As are accurate and factual, they have not been reviewed or approved by the U.S. Department of Education (ED). If you should need written confirmation of AskRegs information for audit or program review purposes, please contact your ED School Participation Division. NASFAA shall not be liable for technical or editorial errors or omissions contained herein; nor for incidental or consequential damages resulting from the furnishing, performance, or use of this material.